Apple, Google and Microsoft have looked to move some hardware production from China to other countries, including Vietnam and Thailand. Product assembly for smartphones could feasibly be moved quickly, experts say, but moving component manufacturing outside of China will also be difficult.
Last year, Apple was reportedly looking to start a trial for the production of its AirPods in Vietnam and asked suppliers to look into moving 15% to 30% of production from China to other parts of South East Asia. P.S. Subramaniam, partner in the strategic operations practice of Kearney, explains there are electronic components like displays and memory, modules such as cameras, and the assembly of the finished goods.
Around 40% of finished goods come from China globally today and there is capacity in other areas of the world, Subramaniam said. So it’s “easier (to) diversify away from China in the short term (3-6 months) for most companies which have well developed product and assembly process documentation,” he added. Meanwhile, around 60% of modules are made in China. That’s harder to move away “but still feasible”, Subramaniam said.
The components part is a bigger issue. “This is a singular choke point as components are a necessary ingredient in modules and finished goods assemblies. This is very hard to move as it requires entire ecosystems, Subramaniam told CNBC.
MacDailyNews Take: Move what you can and work on spreading out the rest of the risk over time. It’s not just coronavirus or future outbreaks that are the issue, as China’s government and its authoritarian actions over many decades plainly attest. It’s usually the most difficult tasks that are the most rewarding.